Jobs report

John Hood

August 28, 2013

When the July jobs report for North Carolina came out last week, showing an uptick in the unemployment rate, all the usual suspects said all the usual things.

Republicans whose main focus is national politics blamed President Barack Obama. Democrats who main focus is state politics blamed Gov. Pat McCrory. The Raleigh News & Observer published an unintentionally hilarious editorial that blamed 2013 tax and regulation reforms that have yet to be implemented (violating the rules of causality), blamed a 2011 reduction in sales taxes (violating the rules of logic), and mistakenly described North Carolina’s net gain of 8,200 jobs last month as “offset by the lost of 5,300 public sector jobs” (violating the rules of arithmetic).

Employment statistics can be complicated. Labor economics can be even more complicated. Still, you can boil down North Carolina’s job trends into three simple statements. First, our unemployment rate has been one of the highest in the nation since the start of the Great Recession. Second, both job creation and unemployment have improved markedly since 2011. Third, they’ll have to improve even more quickly to catch up with the rest of the nation — and to boost the political fortunes of incumbent North Carolina politicians.

To begin with, remember that every monthly jobs report contains two different sets of data, from two different surveys. The smaller survey, of households, produces the data from which officials compute the unemployment rate and related measures. The larger survey, of employers, produces the jobs count. Over time, the household and employer trends track fairly closely. But because the household survey involves a smaller sample, it tends to bounce around more. Also, both sets of numbers are often revised in subsequent months.

So here’s what the two surveys reported in July about North Carolina’s labor market. From the household survey, we learned that the standard unemployment rate was 8.9 percent, up slightly from 8.8 percent in June but still down substantially from July 2012 (9.6 percent) and July 2011 (10.4 percent). There were about 109,000 more employed people in North Carolina this July than in July 2011, and about 69,000 fewer unemployed people. From the employer survey, we learned not only that North Carolina payroll jobs rose by 8,200 but also that payroll jobs are up 69,000 from July 2012 and 131,000 from July 2011.

It was foolish, in other words, for liberal critics to pounce on the July numbers as evidence that the economic policies of North Carolina’s new leaders are failing. McCrory hasn’t been in power long enough to evaluate, anyway, and the state’s economy has clearly improved since the enactment of the first GOP budget in mid-2011. Remember during the 2011 legislative session when then-Gov. Bev Perdue and Democratic lawmakers demanded that Republicans keep the state sales tax at 5.5 percent? They forecast economic disaster if the sales tax dropped to 4.75 percent. Their forecast was silly and properly ignored by Republicans, whose decision saved North Carolinians nearly $1 billion a year (with the largest proportional benefits accruing to lower-income households, by the way).

Unfortunately for the Republicans, they have more to contend with than foolish rhetoric. North Carolina’s current growth rate still isn’t rapid enough to catch up with the national average. While voters wisely don’t hold state politicians as responsible as federal politicians for economic conditions, there is some evidence that governors, in particular, get praise or blame for the relative position of a state’s economy. A 2004 study published in the Journal of Politics found that when a state’s unemployment rate is lower than the national average, that boosts the job approval of its governor. When the rate is higher than the national average, that pulls the governor’s approval down.

McCrory and legislative leaders are counting on their package of tax, regulatory, and other reforms to speed up economic growth and job creation within the next couple of years. Unless you possess a working time machine, please don’t pretend to know the outcome in advance.